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Starbucks named Chipotle Mexican Grill head Brian Niccol as its new CEO on Tuesday in a management shakeup as it tries to fend off pressures from activist investor Elliott Investment Management.
Niccol replaces Laxman Narasimhan, who was tapped in 2022 from Lysol maker Reckitt to undertake a "reinvention" of the world's biggest coffee chain.
But Starbucks stock has continued to suffer, losing roughly 20 per cent of its value over the last five years when the broad-market S&P 500 has gained more than 80 per cent . In July, the company fell short of sales expectations due to weakening demand in the United States and China.
Elliott, which owns a sizable stake, has been pressuring the company to improve its performance and stock price, proposing the company expand its board and improve its governance. Elliott's offer was reported to be part of an effort to allow Narasimhan to keep his job as CEO.
When asked if activist Elliot was consulted about the shakeup, Starbucks Board Chair Mellody Hobson said it had not been.
"We look forward to engaging with all of our shareholders about this new development,” she said on CNBC.
It is unclear what will happen with negotiations with Elliott with the appointment of Niccol.
Shares of Starbucks were up 10 per cent in premarket trading on Tuesday and Chipotle stock was down 8 per cent.
Elliott was seeking to add Jesse Cohn, an equity and managing partner in the firm, to the Starbucks board, Reuters reported Monday, citing sources.
In May, days after Starbucks cut its annual sales forecast, former CEO Howard Schultz wrote on his LinkedIn account that its US operations were the "primary reason for its fall from grace," and that senior leaders need to spend more time with workers.
Niccol has spearheaded the Chipotle burrito chain, which in its most recent quarter topped Wall Street estimates for quarterly results on strong demand.
Starbucks said Niccol will start in his new role on September 9 and that CFO Rachel Ruggeri will serve as interim CEO until that time.
Chipotle said its board had appointed Scott Boatwright, chief operating officer, as interim CEO.